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07/03/2013

Now Playing - “The Statistics”

In our world of sound bites and summaries,
statistics are playing an increasingly important role. They are the basis of
infographics. They are used in catchy headlines. They provide support for
arguments, both real and imagined. They also provide ammunition for the ongoing
wars about compensation, engagement and more.

The
real question is should they have this power?

I
have gathered some recently reported statistics that have been touted as
important, forecasting or eye opening. I then compared them to prior statistics
that came with the same dire warnings.
Feel free to follow the links to explore the wonderful Internet for yourself.

The Mythical Dream Job Warning

2013:
Only 14% of US workers
believe they have the perfect job and more than half want to change careers,
according to a new poll released on Monday (July 1, 2013). Link to article

So, let’s make this clear. 80-85% of people
don't have the perfect dream job or love what they do. In more than ten years,
this number has not dramatically changed, but each time it is reported it is
done with great drama.

Engaging Conversations Past and
Present

2013:
52% of employees are not engaged. Even worse, 18% of employees are “actively
disengaged”. Link to article

Engagement has been a buzzword in our
industry for decades. In the past 10 years, we have improved from 71% being
disengaged in 2003 to only 69% being disengaged in 2013. We wring our hands
about this every year, but the “improvement” is easily within the margin of
error. Perhaps we would be better off putting even more time and effort into
rewards and compensating the 28-31% of employees who seem to be buying into our
work.

CEO to Worker Pay Ratio

This
next set of numbers is the most fun. All three statistics are from 2013.
Depending on whom you ask, CEOs make between 204 and 354 times the average
worker. If I gave disparate ranges like this to my clients, they would send me
back to the drawing board for a bit more effort.

2013:
In 1950, CEO to worker pay
ratio was only 20-to-1, increasing to 42-to-1 in 1980, 120-1 in 2000 and now to
a record high of 204-1 in 2013. Link to article

Advocates
for Say on Pay say it is a way to help control outsized compensation. I did a
quick review of Say on Pay Failures (55 so far) compared to the recently released Equilar / New York Times CEO compensation data. Of the 55 companies who failed 2013
Say on Pay votes, only 2 had CEOs in the top 55 in total compensation.

Paul
A. Ricci of Nuance Communications

Wellington
J. Denahan, Annaly Capital Management

So,
what does this all mean? First, we need to stay focused on the people who like
their jobs and are engaged with our companies. A majority of people will never
get there. While can't ignore them, we can’t let them distract us from those
who are real players on the team. Second, we need to understand that statistics
cannot be warped to anything, but as the CEO:Worker pay ratio shows, they can
be distorted to the point of no longer telling a useful story. Third, Say on
Pay is not about high CEO pay, it’s about pay or performance that do not seem
to correlate. Finally, statistics, as
they are used in the media for public consumption, are not our greatest source
of truths; they are simply numbers looking for believers.

CEO ratio: Of course all three may be correct so it is important to understand the source, what is included, the sample, and why they are reporting the data.
A gut instinct suggests the ratios are too high to be maintained, especially for CEOs who are really employees/managers with special skills like most others rather than entrepreneurs who invest their whole being to developing their company.

Quite likely all three are perfectly accurate and essential not useful. I do agree that huge spreads between CEO pay and average worker pay are unlikely to be in the best long-term interests of anyone. But, until one of the two following things happen we won't see a major change.

1) people at the top need to see their returns reduced as a result of the spread.

2) Workers need to make it a point to not work for companies with such large spreads.